.284 Chapter 13 Macroeconomic Policy and Aggregate Demand and Supply Analysis.. .311 Chapter 12 Web Appendix A The Effects of Macroeconomic Shocks on Asset Prices Go to the Companion Web
Trang 3The Pearson Series in EconomicsAbel/Bernanke/Croushore
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Trang 7This page intentionally left blank
Trang 8PART ONE INTRODUCTION 1
Chapter 1 The Policy and Practice of Macroeconomics 3
Chapter 2 Measuring Macroeconomic Data 18
PART TWO MACROECONOMIC BASICS 45 Chapter 3 Aggregate Production and Productivity 47
Chapter 4 Saving and Investment in Closed and Open Economies 67
Chapter 5 Money and Inflation 102
PART THREE LONG-RUN ECONOMIC GROWTH 142 Chapter 6 The Sources of Growth and the Solow Model 144
Chapter 7 Drivers of Growth: Technology, Policy, and Institutions 175
PART FOUR BUSINESS CYCLES: THE SHORT RUN 198 Chapter 8 Business Cycles: An Introduction 200
Chapter 9 The IS Curve 222
Chapter 10 Monetary Policy and Aggregate Demand 240
Chapter 11 Aggregate Supply and the Phillips Curve 267
Chapter 12 The Aggregate Demand and Supply Model 284
Chapter 13 Macroeconomic Policy and Aggregate Demand and Supply Analysis 312
PART FIVE FINANCE AND THE MACROECONOMY 343 Chapter 14 The Financial System and Economic Growth 345
Chapter 15 Financial Crises and the Economy 363
PART SIX MACROECONOMIC POLICY 394 Chapter 16 Fiscal Policy and the Government Budget 396
Chapter 17 Exchange Rates and International Economic Policy 423
PART SEVEN MICROECONOMIC FOUNDATIONS OF MACROECONOMICS 454 Chapter 18 Consumption and Saving 456
Chapter 19 Investment 486
Chapter 20 The Labor Market, Employment, and Unemployment 514
PART EIGHT MODERN BUSINESS CYCLE ANALYSIS AND MACROECONOMIC POLICY 540 Chapter 21 The Role of Expectations in Macroeconomic Policy 542
Chapter 22 Modern Business Cycle Theory 566
Web Chapter Financial Crises in Emerging Market Economies
Go to the Companion Website, www.pearsonhighered.com/mishkin
BRIEF CONTENTS
vii
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Trang 10PREFACE xxxi
PART ONE INTRODUCTION 1 Chapter 1 The Policy and Practice of Macroeconomics 3
PREVIEW 3
THE PRACTICE OF MACROECONOMICS 3
The Process: Developing Macroeconomic Models 4
The Purpose: Interpreting Macroeconomic Data 5
MACROECONOMIC POLICY 9
How Can Poor Countries Get Rich? 9
Is Saving Too Low? 10
Do Government Budget Deficits Matter? 11
How Costly Is It to Reduce Inflation? 11
How Can We Make Financial Crises Less Likely? 12
How Active Should Stabilization Policy Be? 12
Should Macroeconomic Policy Follow Rules? 13
Are Global Trade Imbalances a Danger? 13
HOW WE WILL STUDY MACROECONOMICS 13
Emphasis on Policy and Practice 13
Concluding Remarks 14
SUMMARY 14
KEY TERMS 14
REVIEW QUESTIONS 14
PROBLEMS 15
Chapter 2 Measuring Macroeconomic Data 18
PREVIEW 18
MEASURING ECONOMIC ACTIVITY: NATIONAL INCOME ACCOUNTING 19
MEASURING GDP: THE PRODUCTION APPROACH 19
Market Value 19
Final Goods and Services 21
Newly Produced Goods and Services 22
Fixed Period of Time 22
POLICY AND PRACTICE: Can GDP Buy Happiness? 22
BOX: Stocks Versus Flows 23
MEASURING GDP: THE EXPENDITURE APPROACH 23
ix
Trang 11x CONTENTS
Consumption Expenditure 24
Investment 24
Government Purchases 25
Net Exports 25
BOX: Meaning of the Word Investment 25
Changes in the Spending Components of GDP over Time 26
MEASURING GDP: THE INCOME APPROACH 27
Categories of Income 27
BOX: An International Comparison of Expenditure Components 28
Income Measures 29
REAL VERSUS NOMINAL GDP 30
Nominal Variables 30
Real Variables 30
Chain-Weighted Measures of Real GDP 31
MEASURING INFLATION 31
GDP Deflator 32
PCE Deflator 32
Consumer Price Index 32
POLICY AND PRACTICE: Policy and Overstatements of the Cost of Living 33
Inflation Rate 34
Percentage Change Method and the Inflation Rate 34
MEASURING UNEMPLOYMENT 35
BOX: MACROECONOMICS IN THE NEWS: Unemployment and Employment 37
MEASURING INTEREST RATES 38
Types of Interest Rates 38
BOX: MACROECONOMICS IN THE NEWS: Interest Rates 38
Real Versus Nominal Interest Rates 39
The Important Distinction Between Real and Nominal Interest Rates 40
SUMMARY 41
KEY TERMS 41
REVIEW QUESTIONS 42
PROBLEMS 43
PART TWO MACROECONOMIC BASICS 45 Chapter 3 Aggregate Production and Productivity 47
PREVIEW 47
DETERMINANTS OF AGGREGATE PRODUCTION 47
Factors of Production 47
Production Function 48
Cobb-Douglas Production Function 48
Trang 12APPLICATION: Why Are Some Countries Rich and Others Poor? 49
Cobb-Douglas Production Function Characteristics 51
Changes in the Production Function: Supply Shocks 54
DETERMINATION OF FACTOR PRICES 56
Demand for Capital and Labor 56
Supply of Capital and Labor 58
Factor Market Equilibrium 58
DISTRIBUTION OF NATIONAL INCOME 60
APPLICATION: Explaining Real Wage Growth 61
APPLICATION: Oil Shocks, Real Wages, and the Stock Market 62
Concluding Remarks 64
SUMMARY 64
KEY TERMS 64
REVIEW QUESTIONS 64
PROBLEMS 65
Chapter 4 Saving and Investment in Closed and Open Economies 67
PREVIEW 67
RELATIONSHIP BETWEEN SAVING AND WEALTH 67
Private Saving 68
Government Saving 68
National Saving 69
POLICY AND PRACTICE: Government Policies to Stimulate Saving 70
Uses of Saving 71
BOX: MACROECONOMICS IN THE NEWS: Balance of Payments Accounts 72
The Link Between Saving and Wealth 73
APPLICATION: How the United States Became the Largest Net Debtor in the World 74
SAVING, INVESTMENT, AND GOODS MARKET EQUILIBRIUM IN A CLOSED ECONOMY 75
Saving and Investment Equation 75
Saving 76
Investment 77
Goods Market Equilibrium 78
RESPONSE TO CHANGES IN SAVING AND INVESTMENT IN A CLOSED ECONOMY 79
Changes in Saving: Autonomous Consumption 79
Changes in Saving: Effects of Fiscal Policy 79
POLICY AND PRACTICE: Crowding Out and the Debate over the 2009 Fiscal Stimulus Package 81
Changes in Autonomous Investment 82
Trang 13xii CONTENTS
SAVING, INVESTMENT, AND GOODS MARKET EQUILIBRIUM IN AN
OPEN ECONOMY 83
Perfect Capital Mobility and the Open Economy 83
Goods Market Equilibrium in an Open Economy 84
SAVING, INVESTMENT, AND THE TRADE BALANCE IN A SMALL OPEN ECONOMY 84
Goods Market Equilibrium in a Small Open Economy 84
Connection Between the World Economy and Small Open Economy 86
RESPONSE TO CHANGES IN SAVING AND INVESTMENT IN A SMALL OPEN ECONOMY 86
Changes in Domestic Saving 86
APPLICATION: The Twin Deficits 87
Changes in Investment 89
LARGE VERSUS SMALL OPEN ECONOMIES 89
SUMMARY 90
KEY TERMS 91
REVIEW QUESTIONS 91
PROBLEMS 92
Chapter 4 Appendix Saving and Investment in Large Open Economies 94
GOODS MARKET EQUILIBRIUM IN LARGE OPEN ECONOMIES 94
CHANGES IN DOMESTIC SAVING 96
APPLICATION: The Global Saving Glut 97
CHANGES IN DOMESTIC INVESTMENT 98
SUMMARY 100
REVIEW QUESTIONS AND PROBLEMS 100
Chapter 5 Money and Inflation 102
PREVIEW 102
WHAT IS MONEY? 103
Meaning of Money 103
Functions of Money 103
BOX: Unusual Forms of Money 104
THE FEDERAL RESERVE SYSTEM AND THE CONTROL OF THE MONEY SUPPLY 104
Federal Reserve Banks 105
Board of Governors of the Federal Reserve System 106
Federal Open Market Committee (FOMC) 106
Control of the Money Supply 106
BOX: The European Central Bank 107
MEASURING MONEY 107
The Federal Reserve’s Monetary Aggregates 107
Trang 14BOX: MACROECONOMICS IN THE NEWS: The Monetary Aggregates 108
The Fed’s Use of M1 Versus M2 in Practice 108
BOX: Where Is All the U.S Currency? 109
QUANTITY THEORY OF MONEY 110
Velocity of Money and the Equation of Exchange 110
From the Equation of Exchange to the Quantity Theory of Money 111
The Classical Dichotomy 112
Quantity Theory and the Price Level 112
Quantity Theory and Inflation 113
APPLICATION: Testing the Quantity Theory of Money 113
HYPERINFLATION 115
POLICY AND PRACTICE: The Zimbabwean Hyperinflation 116
INFLATION AND INTEREST RATES 116
APPLICATION: Testing the Fisher Effect 117
THE COST OF INFLATION 119
Costs of Anticipated Inflation 119
Costs of Unanticipated Inflation 120
SUMMARY 121
KEY TERMS 122
REVIEW QUESTIONS 122
PROBLEMS 123
Chapter 5 Appendix The Money Supply Process 126
THE FED’S BALANCE SHEET 126
Liabilities 126
Assets 127
CONTROL OF THE MONETARY BASE 127
Federal Reserve Open Market Operations 127
Shifts from Deposits into Currency 128
Discount Loans 129
Overview of the Fed’s Ability to Control the Monetary Base .129
MULTIPLE DEPOSIT CREATION: A SIMPLE MODEL 130
Deposit Creation: The Single Bank 130
Deposit Creation: The Banking System 131
Critique of the Simple Model 133
FACTORS THAT DETERMINE THE MONEY SUPPLY 133
Changes in the Nonborrowed Monetary Base 133
Changes in Borrowed Reserves from the Fed 133
Changes in the Required Reserve Ratio 134
Changes in Currency Holdings 134
Changes in Excess Reserves .134
Overview of the Money Supply Process 134
Trang 15xiv CONTENTS
APPLICATION: The Great Depression Bank Panics and the
Money Supply, 1930–1933 135
THE MONEY MULTIPLIER 136
Deriving the Money Multiplier 137
Intuition Behind the Money Multiplier 138
Money Supply Response to Changes in the Factors 139
SUMMARY 140
KEY TERMS 140
REVIEW QUESTIONS AND PROBLEMS 141
PART THREE LONG-RUN ECONOMIC GROWTH 142 Chapter 6 The Sources of Growth and the Solow Model 144
PREVIEW 144
SOURCES OF ECONOMIC GROWTH: GROWTH ACCOUNTING 145
Growth Accounting Equation 145
Growth Accounting in Practice 146
BOX: Time Subscripts 147
APPLICATION: U.S Growth Rates in the Postwar Period 147
Cross-Country Differences in Growth Accounting Rates 148
THE SOLOW GROWTH MODEL 149
Building Blocks of the Solow Growth Model 149
Dynamics of the Solow Growth Model 152
BOX: The Bathtub “Model” of the Steady State 154
Convergence in the Solow Model 154
APPLICATION: Evidence on Convergence, 1960–2009 155
BOX: War, Destruction, and Growth Miracles 156
SAVING RATE CHANGES IN THE SOLOW MODEL 157
POPULATION GROWTH IN THE SOLOW MODEL 158
Population Growth and the Steady State 159
Changes in Population Growth 160
Population Growth and Real GDP Per Capita 160
POLICY AND PRACTICE: China’s One-Child Policy and Other Policies to Limit Population Growth 162
PRODUCTIVITY GROWTH IN THE SOLOW MODEL 162
Technology Growth and the Steady State 162
SUMMING UP THE SOLOW MODEL 163
Solow Model: The Results 163
Solow Model: Limitations 164
SUMMARY 164
KEY TERMS 164
Trang 16REVIEW QUESTIONS 165
PROBLEMS 166
Chapter 6 Appendix A The Golden Rule Level of the Capital-Labor Ratio 168
STEADY STATES AT DIFFERENT CAPITAL-LABOR RATIOS 168
GOLDEN RULE CAPITAL-LABOR RATIO 169
IMPLICATIONS OF THE GOLDEN RULE CAPITAL-LABOR RATIO 171
SUMMARY 172
KEY TERMS 172
REVIEW QUESTIONS AND PROBLEMS 172
Chapter 6 Appendix B The Algebra of the Solow Growth Model 173
SOLVING FOR THE STEADY STATE 173
SUMMARY AND RESULTS 174
REVIEW QUESTIONS AND PROBLEMS 174
Chapter 7 Drivers of Growth: Technology, Policy, and Institutions 175
PREVIEW 175
TECHNOLOGY AS A PRODUCTION INPUT 175
Technology Versus Conventional Production Inputs 176
Technology and Excludability 176
POLICIES TO PROMOTE PRODUCTIVITY 176
Building Infrastructure 176
Increasing Human Capital 177
POLICY AND PRACTICE: Government Measures to Increase Human Capital 177
Encouraging Research and Development 178
INSTITUTIONS AND PROPERTY RIGHTS 180
The Legal System and Property Rights 180
BOX: Geography, the Legal System, and Economic Growth 182
Obstacles to Effective Property Rights 182
POLICY AND PRACTICE: The World Bank’s Doing Business 183
POLICY AND PRACTICE: Does Foreign Aid Work? 184
ENDOGENOUS GROWTH THEORY 186
Allocation of Labor 186
Production Function 186
Production of Technology 187
Sustained Growth in the Romer Model 188
FACTORS THAT AFFECT ENDOGENOUS GROWTH 189
Effects of an Increase in the Fraction of the Population Engaged in R&D, .189
Effect of Changes in the Productiveness of R&D, .189
Response to an Increase in the Total Population N 191
x
a
Trang 17xvi CONTENTS
APPLICATION: Does Population Growth Improve Living Standards? 192
The Romer Model and Saving 194
SUMMARY 195
KEY TERMS 195
REVIEW QUESTIONS 195
PROBLEMS 196
PART FOUR BUSINESS CYCLES: THE SHORT RUN 198 Chapter 8 Business Cycles: An Introduction 200
PREVIEW 200
BUSINESS CYCLE BASICS 201
Business Cycle Illustration 201
BOX: Dating Business Cycles 202
Co-Movement and Timing of Economic Variables 203
MACROECONOMIC VARIABLES AND THE BUSINESS CYCLE 203
Real GDP and Its Components 203
BOX: MACROECONOMICS IN THE NEWS: Leading Economic Indicators 204
Unemployment 206
Inflation 206
Financial Variables 206
International Business Cycles 208
A BRIEF HISTORY OF U.S BUSINESS CYCLES 210
Pre–World War I 210
The Interwar Period and the Great Depression 212
Post–World War II 212
The “Great Moderation” 213
The Great Recession of 2007–2009 213
TIME HORIZONS IN MACROECONOMICS 213
Keynesian and Classical Views on Economic Fluctuations 214
The Short Run Versus the Long Run 214
PRICE STICKINESS 215
Perfect Competition Versus Monopolistic Competition 215
Sources of Price Stickiness 216
Empirical Evidence on Price Stickiness 217
ROAD MAP FOR OUR STUDY OF BUSINESS CYCLES 217
SUMMARY 218
KEY TERMS 218
REVIEW QUESTIONS 219
PROBLEMS 220
Trang 18Chapter 9
The IS Curve 222
PREVIEW 222
PLANNED EXPENDITURE 223
THE COMPONENTS OF EXPENDITURE 223
Consumption Expenditure 223
Planned Investment Spending 224
Net Exports 226
Government Purchases and Taxes 227
GOODS MARKET EQUILIBRIUM 228
Solving for Goods Market Equilibrium 228
Deriving the IS Curve 229
UNDERSTANDING THE IS CURVE 229
What the IS Curve Tells Us: Intuition 229
What the IS Curve Tells Us: Numerical Example 229
Why the Economy Heads Toward the Equilibrium 230
Why the IS Curve Has Its Name and Its Relationship with the Saving-Investment Diagram 231
FACTORS THAT SHIFT THE IS CURVE 232
Changes in Government Purchases 232
APPLICATION: The Vietnam War Buildup, 1964–1969 233
Changes in Taxes 234
POLICY AND PRACTICE: The Fiscal Stimulus Package of 2009 235
Changes in Autonomous Spending 236
Summary of Factors that Shift the IS Curve 237
SUMMARY 237
KEY TERMS 238
REVIEW QUESTIONS 238
PROBLEMS 238
Chapter 10 Monetary Policy and Aggregate Demand 240
PREVIEW 240
THE FEDERAL RESERVE AND MONETARY POLICY 240
THE MONETARY POLICY CURVE 241
The Taylor Principle: Why the Monetary Policy Curve Has an Upward Slope 242
Shifts in the MP Curve 243
POLICY AND PRACTICE: Autonomous Monetary Easing at the Onset of the 2007–2009 Financial Crisis 244
THE AGGREGATE DEMAND CURVE 245
Deriving the Aggregate Demand Curve Graphically 245
Factors That Shift the Aggregate Demand Curve 247
BOX: Deriving the Aggregate Demand Curve Algebraically 247
Trang 19xviii CONTENTS
THE MONEY MARKET AND INTEREST RATES 251
Liquidity Preference and the Demand for Money 251
Demand Curve for Money 252
Supply Curve for Money 253
Equilibrium in the Money Market 253
Changes in the Equilibrium Interest Rate 254
SUMMARY 257
KEY TERMS 257
REVIEW QUESTIONS 257
PROBLEMS 258
Chapter 10 Appendix The Demand for Money 260
KEYNESIAN THEORIES OF MONEY DEMAND 260
Transactions Motive 260
Precautionary Motive 261
Speculative Motive 261
Putting the Three Motives Together 261
PORTFOLIO THEORIES OF MONEY DEMAND 262
Portfolio Theory 262
Portfolio Theory and Keynesian Liquidity Preference 262
Other Factors That Affect the Demand for Money 263
Summary 263
EMPIRICAL EVIDENCE ON THE DEMAND FOR MONEY 263
Interest Rates and Money Demand 264
Stability of Money Demand 264
SUMMARY 265
KEY TERMS 265
REVIEW QUESTIONS AND PROBLEMS 266
Chapter 11 Aggregate Supply and the Phillips Curve 267
PREVIEW 267
THE PHILLIPS CURVE 268
Phillips Curve Analysis in the 1960s 268
POLICY AND PRACTICE: The Phillips Curve Tradeoff and Macroeconomic Policy in the 1960s 268
The Friedman-Phelps Phillips Curve Analysis 269
The Phillips Curve After the 1960s 272
The Modern Phillips Curve 272
The Modern Phillips Curve with Adaptive (Backward-Looking) Expectations 272
THE AGGREGATE SUPPLY CURVE 273
Long-Run Aggregate Supply Curve 274
Short-Run Aggregate Supply Curve 275
Trang 20SHIFTS IN AGGREGATE SUPPLY CURVES 277
Shifts in the Long-Run Aggregate Supply Curve 277
Shifts in the Short-Run Aggregate Supply Curve 278
SUMMARY 280
KEY TERMS 281
REVIEW QUESTIONS 281
PROBLEMS 282
Chapter 12 The Aggregate Demand and Supply Model 284
PREVIEW 284
RECAP OF THE AGGREGATE DEMAND AND SUPPLY CURVES 284
The Aggregate Demand Curve 285
Factors That Shift the Aggregate Demand Curve 285
Short- and Long-Run Aggregate Supply Curves 286
Factors that Shift the Long-Run Aggregate Supply Curve 287
Factors that Shift the Short-Run Aggregate Supply Curve 287
EQUILIBRIUM IN AGGREGATE DEMAND AND SUPPLY ANALYSIS 287
Short-Run Equilibrium 288
Long-Run Equilibrium 288
BOX: Algebraic Determination of the Equilibrium Output and Inflation Rate 289
Short-Run Equilibrium over Time 289
Self-Correcting Mechanism 291
CHANGES IN EQUILIBRIUM: AGGREGATE DEMAND SHOCKS 291
BOX: Algebraic Determination of the Response to a Rightward Shift of the Aggregate Demand Curve 292
APPLICATION: The Volcker Disinflation, 1980–1986 293
APPLICATION: Negative Demand Shocks, 2001–2004 294
CHANGES IN EQUILIBRIUM: AGGREGATE SUPPLY (PRICE) SHOCKS 295
Temporary Supply Shocks 295
APPLICATION: Negative Supply Shocks, 1973–1975 and 1978–1980 297
Permanent Supply Shocks 298
APPLICATION: Positive Supply Shocks, 1995–1999 300
Conclusions 301
APPLICATION: Negative Supply and Demand Shocks and the 2007–2009 Financial Crisis 301
AD/AS ANALYSIS OF FOREIGN BUSINESS CYCLE EPISODES 303
APPLICATION: The United Kingdom and the 2007–2009 Financial Crisis 303
APPLICATION: China and the 2007–2009 Financial Crisis 304
SUMMARY 305
KEY TERMS 306
REVIEW QUESTIONS 306
PROBLEMS 307
Trang 21xx CONTENTS
Chapter 12 Appendix
The Taylor Principle and Inflation Stability 309
SUMMARY 311
REVIEW QUESTIONS AND PROBLEMS 311
Chapter 12 Web Appendix A The Effects of Macroeconomic Shocks on Asset Prices Go to the Companion Website, www.pearsonhighered.com/mishkin Chapter 12 Web Appendix B The Algebra of the Aggregate Demand and Supply Model Go to the Companion Website, www.pearsonhighered.com/mishkin Chapter 13 Macroeconomic Policy and Aggregate Demand and Supply Analysis 312
PREVIEW 312
THE OBJECTIVES OF MACROECONOMIC POLICY 312
Stabilizing Economic Activity 313
Stabilizing Inflation: Price Stability 313
Establishing Hierarchical Versus Dual Mandates 314
THE RELATIONSHIP BETWEEN STABILIZING INFLATION AND STABILIZING ECONOMIC ACTIVITY 314
Monetary Policy and the Equilibrium Real Interest Rate 315
POLICY AND PRACTICE: The Federal Reserve’s Use of the Equilibrium Real Interest Rate, r* 315
Response to an Aggregate Demand Shock 317
Response to a Permanent Supply Shock 320
Response to a Temporary Supply Shock 323
The Bottom Line: The Relationship Between Stabilizing Inflation and Stabilizing Economic Activity 327
HOW ACTIVELY SHOULD POLICY MAKERS TRY TO STABILIZE ECONOMIC ACTIVITY? 327
Lags and Policy Implementation 327
POLICY AND PRACTICE: The Activist/Nonactivist Debate Over the Obama Fiscal Stimulus Package 328
THE TAYLOR RULE 329
The Taylor Rule Equation 329
The Taylor Rule Versus the Monetary Policy Curve 330
The Taylor Rule in Practice 330
POLICY AND PRACTICE: The Fed’s Use of the Taylor Rule 331
INFLATION: ALWAYS AND EVERYWHERE A MONETARY PHENOMENON 332
CAUSES OF INFLATIONARY MONETARY POLICY 334
High Employment Targets and Inflation 334
APPLICATION: The Great Inflation 337
Trang 22PREVIEW 345
THE ROLE OF THE FINANCIAL SYSTEM 345Direct Finance 346Indirect Finance 347
BOX: Financial Intermediaries 348
INFORMATION CHALLENGES AND THE FINANCIAL SYSTEM 349Asymmetric Information 349Free-Rider Problem 350Financial Intermediaries Address Asymmetric Information Problems 350Collateral and Asymmetric Information Problems 353
APPLICATION: The Tyranny of Collateral 353
GOVERNMENT REGULATION AND SUPERVISION OF THE FINANCIAL SECTOR 354Government Regulation to Promote Transparency 354
BOX: Government-Directed Credit 355Government Safety Net 355
BOX: The Enron Implosion 356Role of Prudential Regulation and Supervision 357
APPLICATION: Is China a Counter-Example to the Importance of Financial Development to Economic Growth? 359
PREVIEW 363
Trang 23xxii CONTENTS
ASYMMETRIC INFORMATION AND FINANCIAL CRISES 364Asymmetric Information Problems 364Agency Theory and Financial Crises 364
DYNAMICS OF FINANCIAL CRISES 364Stage One: Initiation of Financial Crisis 364Stage Two: Banking Crisis 367Stage Three: Debt Deflation 368
APPLICATION: The Mother of All Financial Crises: The Great Depression 368Stock Market Crash 368Bank Panics 369Adverse Selection and Moral Hazard Worsen, Causing Aggregate
Demand to Decline 369Real Interest Rates Rise 371Debt Deflation 371Recovery Begins 372International Dimensions 372
APPLICATION: The 2007–2009 Financial Crisis 372Causes of the 2007–2009 Financial Crisis 372Effects of the 2007–2009 Financial Crisis 373
BOX: Collateralized Debt Obligations (CDOs) 374Residential Housing Prices: Boom and Bust 374
POLICY AND PRACTICE: Was the Fed to Blame for the Housing Price Bubble? 375
BOX: Ireland and the 2007–2009 Financial Crisis 379Height of the 2007–2009 Financial Crisis and the Decline of
Aggregate Demand 379
Aggressive Federal Reserve Actions 381
POLICY AND PRACTICE: Nonconventional Monetary Policy and the Monetary Transmission Mechanism 382Worldwide Government Intervention Through Bailouts 383Aggressive Fiscal Policy 384
POLICY AND PRACTICE: Japan’s Lost Decade, 1992–2002 385
POLICY RESPONSE TO ASSET-PRICE BUBBLES 386Types of Asset-Price Bubbles 386
POLICY AND PRACTICE: Debate Over Central Bank Response to Bubbles 387Regulatory Policy Responses to Asset Bubbles 388
SUMMARY 389
KEY TERMS 389
REVIEW QUESTIONS 390
PROBLEMS 390
Trang 24PART SIX MACROECONOMIC POLICY 394
Chapter 16 Fiscal Policy and the Government Budget 396
PREVIEW 396
THE GOVERNMENT BUDGET 396Government Spending 397Revenue 399Budget Deficits and Surpluses 399Government Budget Constraint 400
SIZE OF THE GOVERNMENT DEBT 400Growth of U.S Government Debt over Time 400
POLICY AND PRACTICE: The Entitlements Debate: Social Security and Medicare/Medicaid 402International Comparison: The Size of Government Debt 404
FISCAL POLICY AND THE ECONOMY IN THE LONG RUN 404Why High Government Debt Is Not a Burden 404Why Government Debt Is a Burden 405
POLICY AND PRACTICE: Tax Smoothing 407
FISCAL POLICY AND THE ECONOMY IN THE SHORT RUN 407Aggregate Demand and Fiscal Policy 407Expenditure and Tax Multipliers 408
POLICY AND PRACTICE: The 2009 Debate over Tax-Based Versus Spending-Based Fiscal Stimulus 409Aggregate Supply and Fiscal Policy 410Supply-Side Economics and Fiscal Policy 411Balancing the Budget: Expansionary or Contractionary? 412
POLICY AND PRACTICE: Two Expansionary Fiscal Contractions:
Denmark and Ireland 412
BUDGET DEFICITS AND INFLATION 413Government-Issued Money 413Revenue from Seignorage 414
POLICY AND PRACTICE: The Euro Area’s Stability and Growth Pact:
A Greek Tragedy? 414
BUDGET DEFICITS AND RICARDIAN EQUIVALENCE 415Implications of Ricardian Equivalence 416Objections to Ricardian Equivalence 416Bottom Line on Ricardian Equivalence 417
POLICY AND PRACTICE: The Bush Tax Cuts and Ricardian Equivalence 418
SUMMARY 418
KEY TERMS 419
REVIEW QUESTIONS 419
PROBLEMS 420
Trang 25PREVIEW 423
FOREIGN EXCHANGE MARKET AND EXCHANGE RATES 423Foreign Exchange Rates 424The Distinction Between Real and Nominal Exchange Rates 424
BOX: MACROECONOMICS IN THE NEWS: Foreign Exchange Rates 425The Importance of Exchange Rates 426Foreign Exchange Trading 427
EXCHANGE RATES IN THE LONG RUN 428Law of One Price 428Theory of Purchasing Power Parity 428
BOX: Big Macs and PPP 429
EXCHANGE RATES IN THE SHORT RUN 430Supply Curve for Domestic Assets 431Demand Curve for Domestic Assets 431Equilibrium in the Foreign Exchange Market 432
ANALYSIS OF CHANGES IN EXCHANGE RATES 432Changes in the Demand for Domestic Assets 432
APPLICATION: The Subprime Financial Crisis and the Dollar 435
APPLICATION: Why Are Exchange Rates So Volatile? 438
AGGREGATE DEMAND AND SUPPLY ANALYSIS OF CHANGES
IN EXCHANGE RATES 438
INTERVENTION IN THE FOREIGN EXCHANGE MARKET 440Foreign Exchange Intervention 440Intervention and the Exchange Rate 441
POLICY AND PRACTICE: A Day at the Federal Reserve Bank of New York’s Foreign Exchange Desk 442
FIXED EXCHANGE RATE REGIMES 443Fixed Exchange Rate Regime Dynamics 443The Policy Trilemma 445
APPLICATION: How Did China Accumulate over $2 Trillion of International Reserves? 446
TO PEG OR NOT TO PEG 447Advantages of Exchange-Rate Pegging 447Disadvantages of Exchange-Rate Pegging 447
POLICY AND PRACTICE: The Collapse of the Argentine Currency Board 449
Trang 26Go to the Companion Website, www.pearsonhighered.com/mishkin
Chapter 17 Web Appendix B Speculative Attacks and Foreign Exchange Crises
Go to the Companion Website, www.pearsonhighered.com/mishkin
Chapter 18 Consumption and Saving 456
PREVIEW 456
THE RELATIONSHIP BETWEEN CONSUMPTION AND SAVING 456
INTERTEMPORAL CHOICE AND CONSUMPTION 457The Intertemporal Budget Constraint 457The Intertemporal Budget Constraint in Terms of Present Discounted Value 459Preferences 460Optimization 461
THE INTERTEMPORAL CHOICE MODEL IN PRACTICE:
INCOME AND WEALTH 462Response of Consumption to Income 462Response of Consumption to Wealth 463Consumption Smoothing 464
Interest Rates and the Intertemporal Budget Line 464The Optimal Level of Consumption and the Intertemporal Budget Line 465Borrowing Constraints 466
THE KEYNESIAN THEORY OF CONSUMPTION 468The Keynesian Consumption Function: Building Blocks 468Keynesian Consumption Function 469The Relationship of the Keynesian Consumption Function to
Intertemporal Choice 469
THE PERMANENT INCOME HYPOTHESIS 469The Permanent Income Consumption Function 470Relationship of the Permanent Income Hypothesis and Intertemporal Choice 470
POLICY AND PRACTICE: The 2008 Tax Rebate 471
Trang 27THE LIFE-CYCLE HYPOTHESIS 472Life-Cycle Consumption Function 472Saving and Wealth Over the Life Cycle 473
APPLICATION: Housing, the Stock Market, and the Collapse of Consumption in 2008 and 2009 475
TWO MODIFICATIONS OF THE THEORY: THE RANDOM WALK HYPOTHESIS AND BEHAVIORAL ECONOMICS 475The Random Walk Hypothesis 475Behavioral Economics and Consumption 476
POLICY AND PRACTICE: Behavioral Policies to Increase Saving 477
SUMMARY 484
REVIEW QUESTIONS AND PROBLEMS 484
Chapter 19 Investment 486
PREVIEW 486
DATA ON INVESTMENT SPENDING 486
THE NEOCLASSICAL THEORY OF INVESTMENT 487Determining the Level of Capital Stock 488User Cost of Capital 488Determining the Desired Level of Capital 489From the Desired Level of Capital to Investment 490Changes in the Desired Level of the Capital Stock 492Summary: Neoclassical Theory of Investment 495
INVENTORY INVESTMENT 498Motivation for Holding Inventories 498The Theory of Inventory Investment 499
TOBIN’S q AND INVESTMENT 500
Tobin’s q Theory 500 Tobin’s q Versus Neoclassical Theory 500
APPLICATION: The Stock Market and Boom and Bust in “New Economy” Investment, 1995–2001 501
RESIDENTIAL INVESTMENT 502Determination of Housing Prices 502From House Prices to Residential Investment 503Changes in the Demand for Housing 504Summary: Residential Investment 505
Trang 28APPLICATION: Boom and Bust in the Housing Market, 2001–2009 507
POLICY AND PRACTICE: U.S Government Policies and the
SUPPLY AND DEMAND IN THE LABOR MARKET 518The Demand Curve for Labor 518The Supply Curve 518Equilibrium in the Labor Market 519
RESPONSE OF EMPLOYMENT AND WAGES TO CHANGES IN LABOR
DEMAND AND LABOR SUPPLY 520Changes in Labor Demand 520Changes in Labor Supply 521
APPLICATION: Why are Returns to Education and Income Inequality
Increasing? 523
DYNAMICS OF UNEMPLOYMENT 525Flows Into and Out of Employment Status 525Duration of Unemployment 527
CAUSES OF UNEMPLOYMENT 527Frictional Unemployment 527
POLICY AND PRACTICE: Unemployment Insurance and Unemployment 528Structural Unemployment 529Wage Rigidity 529
POLICY AND PRACTICE: Minimum Wage Laws 530
BOX: Efficiency Wages and Henry Ford 531
NATURAL RATE OF UNEMPLOYMENT 532Changes in the Natural Rate of Unemployment 532
APPLICATION: Why Are European Unemployment Rates Generally
Much Higher Than U.S Unemployment Rates? 534
SUMMARY 536
KEY TERMS 536
Trang 29PREVIEW 542
RATIONAL EXPECTATIONS AND POLICY MAKING 542Adaptive Expectations 543Rational Expectations 543Microeconomic Rationale Behind the Theory 544Rational Expectations Theory and Macroeconomic Analysis 544Rational Expectations Revolution 545
LUCAS CRITIQUE OF POLICY EVALUATION 545Econometric Policy Evaluation 546
APPLICATION: The Consumption Function 546
POLICY CONDUCT: RULES OR DISCRETION? 547Discretion and the Time-Inconsistency Problem 547Types of Rules 548The Case for Rules 548
POLICY AND PRACTICE: The Political Business Cycle and Richard Nixon 549The Case for Discretion 550
POLICY AND PRACTICE: The Demise of Monetary Targeting in Switzerland 550Constrained Discretion 551
THE ROLE OF CREDIBILITY AND A NOMINAL ANCHOR 551Benefits of a Credible Nominal Anchor 551Credibility and Aggregate Demand Shocks 552Credibility and Aggregate Supply Shocks 554
APPLICATION: A Tale of Three Oil Price Shocks 555
APPROACHES TO ESTABLISHING CENTRAL BANK CREDIBILITY 557Inflation Targeting 557
POLICY AND PRACTICE: Will the Federal Reserve Adopt Inflation Targeting? 558Appoint “Conservative” Central Bankers 559
POLICY AND PRACTICE: The Appointment of Paul Volcker, Anti-Inflation Hawk 560Increase Central Bank Independence 560
SUMMARY 562
KEY TERMS 562
Trang 30NEW KEYNESIAN MODEL 571Building Blocks of the New Keynesian Model 571Business Cycle Fluctuations in the New Keynesian Model 574Objections to the New Keynesian Model 576
A COMPARISON OF BUSINESS CYCLE MODELS 576How Do the Models Differ? 576Short-Run Output and Price Responses: Implications for Stabilization Policy 578
POLICY AND PRACTICE: Management of Expectations and
Nonconventional Monetary Policy 581Anti-Inflation Policy 582
BUSINESS CYCLE MODELS WITH FINANCIAL FRICTIONS 584
Shift in the IS Curve 584
Shift in the Aggregate Demand Curve and the Effect on Output and Inflation 586Effect on Real Interest Rates 586The Role of Financial Frictions in Business Cycles 586
APPLICATION: Financial Frictions and the 2007–2009 Recession 586
SUMMARY 588
KEY TERMS 588
REVIEW QUESTIONS 588
PROBLEMS 589
Chapter 22 Web Appendix
The New Classical Model
Go to the Companion Website, www.pearsonhighered.com/mishkin
No Long-Run Trade-off Between Unemployment and Inflation 593
Trang 31The Crucial Role of Expectations 594The Taylor Principle 595The Time Inconsistency Problem 595Central Bank Independence 596Commitment to a Nominal Anchor 596Credibility 596Institutions Rule 597
WHERE MACROECONOMISTS DISAGREE 597Flexibility of Wages and Prices 597How Much Time It Takes to Get to the Long Run 597Sources of Business Cycle Fluctuations 598Effectiveness of Stabilization Policy 599Cost of Reducing Inflation 599The Dangers of Budget Deficits 600
THE FUTURE OF BUSINESS CYCLE THEORY 601
SUMMARY 602
KEY TERMS 602
Web Chapter Financial Crises in Emerging Market Economies
Go to the Companion Website, www.pearsonhighered.com/mishkin
PREVIEW DYNAMICS OF FINANCIAL CRISES IN EMERGING MARKET ECONOMIES
Stage One: Initiation of Financial CrisisStage Two: Currency Crises
Stage Three: Full-Fledged Financial Crisis
APPLICATION: Crisis in South Korea, 1997–1998 APPLICATION: The Argentine Financial Crisis, 2001–2002
BOX: When an Advanced Economy Is like an Emerging Market Economy: The Icelandic Financial Crisis of 2008
POLICY AND PRACTICE: Preventing Emerging Market Financial Crises
SUMMARY KEY TERMS REVIEW QUESTIONS AND PROBLEMS GLOSSARY G-1
INDEX I-1
Trang 32There has never been a more exciting time to teach macroeconomics The recentworldwide financial crisis cast a spotlight on macroeconomics and has promptedinstructors worldwide to rethink their teaching of the course Students today enterthe intermediate macroeconomic course knowing the relevance of the business
cycle—what is happening in their world right now in the wake of the most severe recession since World War II The silver lining of these trying economic times is the
ability to draw on this familiarity and the rich tapestry of recent economic events toenliven macroeconomic theory
Macroeconomics: Policy and Practice focuses on the policy issues currently debated
by the media and public at large Building on my expertise in macroeconomic policymaking at the Federal Reserve, I highlight the techniques used by policy makers inpractice I ground this applied approach to intermediate macroeconomics with a care-ful, step-by-step development of all models
POLICY AND PRACTICE
This book emphasizes policy and practice in macroeconomics by providing cal frameworks geared to discussing the most exciting, current, major policy debates
theoreti-in the macroeconomics field The best way to teach macroeconomics is by conttheoreti-inually
exposing the student to cases and applications so they really understand the
A DYNAMIC APPROACH TO MACROECONOMICS
Analyzing today’s hot-button policy issues requires approaching macroeconomic ory with the models that researchers and policy makers employ The central modeling
the-element in Macroeconomics: Policy and Practice is a powerful, dynamic aggregate
demand and supply (AD/AS) model that highlights the interaction of inflation andeconomic activity In this model, inflation is on the vertical axis (as opposed to theprice level)
Given the vital importance of this model, I build it step-by-step across Chapters 9–13:
• Chapter 9 develops the first building block of the aggregate demand and supply
model, the IS curve.
xxxi
PREFACE
Trang 33• Chapter 10 describes how monetary policy makers set real interest rates with the
monetary policy (MP) curve, which describes the relationship between inflation and real interest rates It then uses the MP curve and the IS curve to derive the
aggregate demand curve
• Chapter 11 uses the Phillips curve to derive the aggregate supply curve.
• Chapter 12 assembles the building blocks from preceding chapters to develop
the aggregate demand and supply model and puts this model to immediate usewith Applications analyzing business cycle fluctuations in the United Statesand abroad
• Chapter 13 shifts perspective by showing how the aggregate demand and
sup-ply model can help us understand the issues policy makers confront when theyattempt to stabilize inflation and output fluctuations
The aggregate demand and supply model with inflation on the vertical axis fore serves as the sole engine for analysis of short-run fluctuations Students benefit fromthis exclusive focus and careful development of a single model: Relying on the dynamicAD/AS model continually reinforces their understanding of the model and provides aunified framework for all analysis
there-The dynamic AD/AS model includes many of the essential elements of the ISLM
model, including developing the IS curve in Chapter 9 and illustrating the determination
of interest rates in the money market through the interaction of money demand and ply in Chapter 10 The dynamic AD/AS model has the advantage that it directly allows
sup-a dynsup-amic sup-ansup-alysis of the intersup-action of inflsup-ation sup-and economic sup-activity, sup-a key fesup-ature ofmodern macroeconomic analysis
THE INTERACTION OF FINANCE AND MACROECONOMICS
The financial crisis that hit the world economy from 2007 to 2009 made abundantlyclear the interaction between finance and macroeconomics Two full chapters on financeand macroeconomics provide a coherent approach to key topics such as financial sys-tem dynamics and asymmetric information and demonstrate their relevance in macro-economic analysis Chapter 14, “The Financial System and Economic Growth,” showshow a well-functioning financial system promotes economic growth and develops toolsthat are then used in Chapter 15, “Financial Crises and the Economy,” to examine howdisruptions to the financial system affect aggregate demand and the economy, with aparticular emphasis on the root causes, effects, and policy responses to the financial cri-sis of 2007–2009 An additional Web Chapter, “Financial Crises in Emerging MarketEconomies,” expands the analysis of economic fluctuations to economies that haverecently opened up their markets to the outside world
FOCUS ON ECONOMIC GROWTH
The explosion of research on economic growth in recent years is an exciting ment in the macroeconomics field with direct relevance to the question of why somecountries have slow economic growth and stay poor, while others have rapid economicgrowth and prosper I discuss the Solow model in detail in Chapter 6 and presentendogenous growth theory and the importance of institutions to economic growth inChapter 7 As mentioned previously, Chapter 14 includes additional material on eco-nomic growth
Trang 34AN INTERNATIONAL PERSPECTIVE
Topical coverage and applications integrate an international dimension throughout
Macroeconomics: Policy and Practice For example, Chapter 4’s analysis of the interaction
of saving and investment discusses open and closed economies together, rather than inseparate chapters International trade and the impact of net exports on aggregatedemand appears immediately in the AD/AS model in Part 4, as opposed to in a sepa-rate chapter, and the textbook applies the aggregate demand and supply model to ana-lyze the impact of the 2007–2009 financial crisis in the UK, Ireland, and China The Webchapter on emerging market economies provides further international perspective
TABLE OF CONTENTS OVERVIEW
We begin our study with an introduction to the study of macroeconomics Chapter 1describes the questions that macroeconomists seek to answer and the data they analyze,raising key policy questions that will be the focus of the remaining chapters of thisbook Chapter 2 examines how economists define and measure the most importantmacroeconomic data
In Part 2, we construct some basic frameworks that will serve as building blocks forour analysis in the rest of the book, including production and the productive capacity of
an economy (Chapter 3), the relationship between saving and investment and how itaffects the amount of wealth in the economy and real interest rates (Chapter 4), and thelink between money, inflation, and nominal interest rates and why inflation is costly(Chapter 5)
Part 3 explores why some countries have slow economic growth and stay poor,while others have rapid economic growth and prosper Chapter 6 develops the Solowgrowth model, while Chapter 7 delves into the sources of economic growth by examin-ing in more detail how advances in technology and the development of institutions pro-motes economic growth
In Part 4, we move to short-run economic fluctuations in aggregate output, ployment, and inflation Chapter 8 provides an introduction to the study of short-runeconomic fluctuations by describing the characteristics of the business cycle Asdescribed earlier, Chapters 9–11 develop the elements of the aggregate demand andsupply model with inflation on the vertical axis Chapter 12 assembles the overallmodel and provides a number of applications for immediate reinforcement; Chapter 13then employs the model to understand the choices policy makers face if they seek to sta-bilize inflation and output fluctuations
unem-In Part 6 we turn to the important role that finance plays in macroeconomics in boththe long and the short run Chapter 14 focuses on the long run, showing how a well-functioning financial system promotes economic growth and building a framework forChapter 15’s look at how finance can affect the economy in the short run Chapter 15 ana-lyzes the dynamics of financial crises and then applies this analysis to explaining boththe most recent worldwide financial crisis as well as earlier episodes in U.S history Part 7 delves deeper into macroeconomic policy Chapter 16 discusses fiscal policy,including the government budget and its relationship with government debt and thelong- and short-run effects of budget deficits, tax cuts, and government spending.Chapter 17 examines international economic policy by developing a supply anddemand analysis of how exchange rates are determined and then discusses the effects
of exchange rate fluctuations on the economy
Trang 35Part 8 develops microeconomic analysis of households’ and firms’ behavior to bolster understanding of macroeconomic relationships featured earlier in the book Chapter 18 discusses the microeconomic foundations of consumption and saving,Chapter 19 develops and applies microeconomic models of investment behavior, and Chapter 20 focuses on the labor market (Some professors may choose to assignthese chapters up front in their courses after Chapters 1–3.)
We end the book in Part 9 by discussing the latest developments in business cycletheory that have arisen from a greater focus on microeconomic foundations of macro-economic analysis Chapter 21 uses rational expectations to discuss how expectationsinfluence macroeconomic policy Chapter 22 describes the two competing businesscycle theories that developed in the wake of rational expectations theory—the real busi-ness cycle model and the new Keynesian model—as well as recent efforts to bringfinancial frictions into macroeconomic models The epilogue outlines how these newapproaches to business cycle theory and recent research on what drives economicdevelopment have affected where macroeconomists agree and disagree about the con-duct of macroeconomic policy
A FLEXIBLE STRUCTURE
Macroeconomics: Policy and Practice offers a highly flexible structure with many different
paths that instructors can take to tailor the book to their course needs Most instructorswill begin by assigning Chapters 1–4 For a long-run emphasis, instructors can thenassign Chapters 5–7 Instructors wishing to cover the short run first could instead pro-ceed directly to Part 4
The core chapters that most instructors will teach in their courses are in the firstfour parts of the book, Chapters 1–13 Instructors can assign subsequent chapters asthey so choose or skip them entirely, allowing a focus on the particular areas of macro-economics that match each instructor’s course goals Suggested outlines for semester-long courses with varying emphases follow (Quarter-long courses would typically usethree or four fewer of the optional chapters.)
• Course Starting with a Long-Run Analysis: Chapters 1–13, and up to six of the
remaining eleven chapters
• Course Starting with Micro Foundations and Long-Run Analysis: Chapters 1–3,
18–20, 4–13, and up to three of the remaining eight chapters
• Course Starting with Short-Run Analysis: Chapters 1–5, 8–13, 6–7, and up to six of
the remaining eleven chapters
• Course Starting with Micro Foundations and Short-Run Analysis: Chapters 1–3,
18–20, 4–5, 8–13, 6–7 and up to three of the remaining eight chapters
• Course Focusing on the Micro Foundations of Modern Business Cycle Analysis:
Chapters 1–3, 18–20, 4–5, 8–13, 21–22 and up to two of the remaining tenchapters
• Course with International Focus: Chapters 1–13, 17, Web chapter on emerging
mar-ket economies, and up to four of the remaining nine chapters
• Course with Finance Focus: Chapters 1–15 and up to four of the remaining seven
chapters
Trang 36INTEREST-GENERATING FEATURES
Motivating the study of macroeconomics means bringing it to life through a wide ety of pedagogical features
vari-Previews at the beginning of each chapter tell students where the chapter is heading,
why specific topics are important, and how they relate to other topics in the book
Applications apply the analysis in each chapter to explain important real-world
situations
Policy and Practice cases explore specific examples of actual policies and how they
were executed
Macroeconomics in the News boxes introduce students to relevant news articles and
data that are reported daily in the press and explain how to read them
Boxes highlight interesting material, including historical episodes and recent events Summary tables are useful study aids recapping key points.
Key statements are important points set in boldface italic type so that the student can
easily find them for later references
Graphs with detailed captions demonstrate the interrelationship of the variables and
are central to the illustrations of policy analysis Innovative color-blended arrows guidestudents’ analysis of the meaning of shifting curves
Summary at the end of each chapter lists the main points covered.
Key terms, important words or phrases, are boldface when they are defined for the
first time and listed by page number at the end of the chapter
End-of-chapter questions and problems guide students’ mastery of the material,
with a particular emphasis on real-world applications
SUPPLEMENTAL RESOURCES SIMPLIFY TEACHING AND LEARNING
A variety of comprehensive supplemental resources accompany this book for sors and students
profes-MyEconLab is the premier online assessment and tutorial system,
pair-ing rich online content with innovative learnpair-ing tools The MyEconLab course for
Macroeconomics: Policy and Practice includes all the review questions and problems from
the textbook As a special feature, all Policy and Practice cases and Applications are alsooffered in MyEconLab along with three to four assessment questions to test students’understanding of the key concepts Look for these exercises within each chapter in a sep-arate section called “Applications.”
Students and MyEconLab
The MyEconLab online homework and tutorial system puts students in control of theirown learning through a suite of study and practice tools correlated with the online,interactive version of the textbook and other media tools Within MyEconLab’s struc-tured environment, students practice what they learn, test their understanding, andthen pursue a study plan that MyEconLab generates for them based on their perfor-mance on practice tests
Trang 37Instructors and MyEconLab
MyEconLab provides flexible tools that allow instructors to easily and effectively tomize online course materials to suit their needs Instructors can create and assigntests, quizzes, or homework assignments MyEconLab saves time by automaticallygrading questions and tracking results in an online grade book After registering forMyEconLab, instructors also have access to downloadable supplements
cus-Additional MyEconLab Features
• Mishkin Interviewed on the Financial Crisis Watch video footage from a
recent interview with the author, complete with assignable questions
• Weekly News Updates Each week, a relevant and current article from a
news-paper or journal is posted with discussion questions
• Research Navigator (CourseCompass version only) Extensive help on the
research process and exclusive databases of accredited and reliable source
mate-rial, including the Financial Times and peer-reviewed journals.
For more information and to register, please visit www.myeconlab.com.
Additional Instructor Resources
The Instructor’s Manual, an online supplement prepared by Martin Pereyra of
University of Missouri and the author, offers chapter overviews, outlines and tives, and the answers to end-of-chapter questions and problems Additionally, theInstructor’s Manual includes resources for each chapter that tie in to the Applicationsand Policy and Practice features of the chapter, including discussion questions that pro-fessors can use in class with students; references to interesting outside materials such asnewspaper and journal articles and macroeconomic data; and links to websites withrelated real-world examples The Instructor’s Manual is available electronically inMicrosoft Word format and PDF format
objec-The PowerPoint Presentations, prepared by Jim Lee of Texas A & M University–
Corpus Christi, provide all figures and tables from the text, as well as brief lecture notesthat follow the structure and sequence of the text They include coverage of the maintopics of the chapter, organized by A-head, the key terms and equations from the chap-ter, and coverage of the Applications and Policy and Practice features in the chapter
The Test Item File, prepared by Paul Kubik of DePaul University, Victor Valcarcel of
Texas Tech University, and Brian Trinque of University of Texas–Austin, provides
75 multiple-choice questions and 10 short-answer questions for each chapter The questionsprovide a mix of numerical, graphical, and conceptual approaches of all chapter topics Inaddition, the questions are MyEconLab-compatible and follow the Association to AdvanceCollegiate Schools of Business (AACSB) tagging procedures The Test Item File is availableelectronically in Microsoft Word format as well as in computerized TestGen format files thatmay be used with TestGen test-generating software This test-generating program permitsinstructors to edit, add, or delete questions from the test bank; analyze test results; and orga-nize a database of tests and student results, allowing for flexibility and ease of use
Blackboard and WebCT Online Courses Pearson also offers fully customizable
course content for the Blackboard and WebCT course management systems thatincludes a link to the MyEconLab software hosting all of the course materials
Trang 38Additional Student Resources
The Study Guide, prepared by Aaron Jackson of Bentley University and accuracy
reviewed by Quentin Duroy of Denison University, includes for each chapter a summarythat provides explanations of all key terms and equations, 15 multiple-choice questionswith brief explanations, 10 short-answer questions with brief explanations, and 2 practiceproblems with worked out graphical and/or numerical answers The Study Guide is avail-able in print format
The Companion Website, located at www.pearsonhighered.com/mishkin, features
Web appendices on a wide variety of topics, as well as a Web chapter: Financial Crises
in Emerging Market Economies
ACKNOWLEDGMENTS
There are many people to thank on this project I have been blessed with two nary editors on this project: Noel Seibert, my acquisitions editor, and Rebecca Ferris-Caruso, my development editor Many thanks as well to members of the production,editorial, and marketing team at Pearson: Kathryn Dinovo, Alison Eusden, CarolynTerbush, David Theisen, and Kathleen McLellan I also want to thank Neil Mehrotraand Ozge Akinci for very helpful research assistance and Daniel Sorid for giving me thestudent’s perspective while providing me with invaluable editing I have also receivedinsightful comments from my colleagues, Marc Giannoni and Mark Gertler
extraordi-This book has been thoroughly accuracy checked through several rounds I wouldalso like to thank the accuracy reviewers, Jim Eaton and David Beckworth, for theirextraordinary efforts and attention to detail In addition, I have received thoughtfulcomments from outside reviewers, editorial board members, focus group participants,community call participants, and class testers, who are listed below
Reviewers:
Gilad Aharonovitz, Washington State University
S Nuray Akin, University of Miami Lian An, University of North Florida
S Boragan Aruoba, University of Maryland Elizabeth Asiedu, University of Kansas Nursel Aydiner-Avsar, University of Utah Lance Bachmeier, Kansas State University David Beckworth, Texas State University Cihan Bilginsoy, University of Utah Nicola Borri, Boston University Michael Carew, Baruch College of CUNY Joel D Carton, Florida International University Marcelle Chauvet, University of California Darian Chin, California State University–Los Angeles Olivier Coibion, College of William and Mary Firat Demir, University of Oklahoma
James Devine, Loyola Marymount University John Dogbey, Ohio University
Fred Donatelli, Binghamton University
Trang 39Abdunasser Duella, California State University–Fullerton Quentin Duroy, Denison University
Amitava Krishna Dutt, University of Notre Dame Jim Eaton, Bridgewater College
Ryan Edwards, Queens College Sharon Erenburg, Eastern Michigan University Alexander Field, Santa Clara University Hamilton Fout, Kansas State University Jean Gauger, The University of Tennessee Ronald D Gilbert, Texas Tech University George Heitmann, Muhlenberg College
Yu Hsing, Southeastern Louisiana University Ralph D Husby, University of Illinois at Urbana–Champaign Kim Huynh, Indiana University–Bloomington
Murat Iyigun, University of Colorado–Boulder Aaron L Jackson, Bentley University
Barry Jones, Binghamton University Bryce Kanago, University of Northern Iowa Cem Karayalcin, Florida International University–University Park Arthur Kartman, San Diego State University
John Keating, University of Kansas Elizabeth Sawyer Kelly, University of Wisconsin–Madison Young Se Kim, University of North Texas
Paul Kubik, DePaul University Ken Kuttner, Williams College Leonard Lardaro, University of Rhode Island Jim Lee, Texas A & M University–Corpus Christi David I Levine, University of California–Berkeley Dennis Patrick Leyden, University of North Carolina at Greensboro
T K Lim, Carnegie Mellon University Bernard Malamud, University of Nevada–Las Vegas Kathryn G Marshall, California Polytechnic State University Bruce McGough, Oregon State University
W Douglas McMillin, Louisiana State University Ellen E Meade, American University
Diego Mendez-Carbajo, Illinois Wesleyan University Fabio Milani, University of California–Irvine
Olivier Morand, University of Connecticut Jon Nadenichek, California State University–Northridge Kanda Naknoi, Purdue University
John Neri, University of Maryland Farrokh Nourzad, Marquette University Phacharaphot Nuntramas, San Diego State University Iordanis Petsas, University of Scranton
David E Rapach, Saint Louis University Dan Rickman, Oklahoma State University Joseph Santos, South Dakota State University Andrei Shevchenko, Michigan State University Mark Siegler, California State University–Sacramento
Trang 40Tara Sinclair, The George Washington University
Georg Strasser, Boston College
Jack Strauss, St Louis University
Aditi Thapar, New York University
Rebecca Achee Thornton, University of Houston
Brian Trinque, University of Texas–Austin
Kwok Pin Tsang, Virginia Polytechnic Institute and State University
Michelle Turnovsky, University of Washington
Geetha Vaidyanathan, University of North Carolina–Chapel Hill
Victor Valcarcel, Texas Tech University
Ann Villamil, University of Illinois
Charles S Wassell, Central Washington University
Bill Yang, Georgia Southern University
Ben Young, University of Missouri
Wei-Choun Yu, Winona State University
Editorial Advisory Board:
Joel D Carton, Florida International University
Jim Eaton, Bridgewater College
Murat Iyigun, University of Colorado–Boulder
Aaron L Jackson, Bentley University
Elizabeth Sawyer Kelly, University of Wisconsin–Madison
Kathryn G Marshall, California Polytechnic State University
Olivier Morand, University of Connecticut
Mark Siegler, California State University–Sacramento
Brian Trinque, University of Texas–Austin
Michelle Turnovsky, University of Washington
Geetha Vaidyanathan, University of North Carolina–Chapel Hill
Victor Valcarcel, Texas Tech University
Bill Yang, Georgia Southern University
Focus Group Participants:
Francis Ahking, University of Connecticut
Serife Nuray Akin, University of Miami
Lian An, University of North Florida
James Arias, Georgia College and State University
Nursel Aydiner-Avsar, University of Utah
Michael D Bauer, Economist, Federal Reserve Bank of San Francisco
David Beckworth, Texas State University
Emma Bojinova, Canisius College
Mark Brady, San Jose State University
Michael Buckley, Fordham University
Susanne Buesselmann, Wayne State University
Bolong Cao, Ohio University
Piyaphan Changwatchai, University of Utah
Adhip Chaudhuri, Georgetown University
May Collins, Mira Costa College
William Craighead, Wesleyan University
Chetan Dave, New York University–Abu Dhabi